When we are preparing our video marketing strategy, we include a set of metrics called KPIs, which we have defined in order to understand if our proposed objective or objectives have been met. One of the metrics that sheds light on the benefit(s) generated from our investment is return on investment. In this article we are going to take a detailed look at this metric and see what we can do to optimize the ROI associated with our video platform’s viewer acquisition budget.
What is ROI?
ROI is the metric that gives us insight into the benefit(s) obtained vis-a-vis the investment made. Frequently, a portion of the budget is earmarked for the creation of video productions or the acquisition of rights for content. This is why it is important to check that the investment related to everything around production, rights acquisition, content launch, and the associated marketing strategy, which aims to inform users about the content thus promoting its consumption, has delivered some kind of benefit (not a loss), monetary or otherwise, as we will see later.
How is return on investment calculated?
The calculation of the ROI as a monetary metric of the benefit (the profit) would be as follows:
ROI = (income – investment) / investment
For example, if we invest €100,000 in a marketing campaign to promote content that is premiering in our video catalog and we recognize a profit of €500,000 directly attributable to this title in relation to new subscriber acquisition in our streaming service, we would calculate ROI as:
€500,000 – €100,000 / €100,000 = 400%
So why did we mention before that we would want to use ROI to estimate a monetary OR another non-monetary benefit? Because ROI can also be measured using other factors, not just direct sales, for example.
Return on investment can also be calculated using, for example, the increased engagement of current subscribers resulting from the new content title that has been made available. So, it will depend on the video business’ goals at any given moment of its life cycle.
What can you do to optimize your streaming service’s ROI?
First, make sure you really know your subscribers, so you know what kind of content they are interested in watching. Then, provide them with a catalog full of content and video productions that, based on their behavior and previous viewing patterns, will be of interest to them. (This link will take you to an article that explains the importance of analyzing your audience so you can offer interesting content and prevent churn). You will want to define a marketing strategy segmented by viewer type, broadcasting channels preferred by each segment, etc. Once you have gotten the results from this activity, you should evaluate not only the ROI but other metrics that are of paramount importance to your streaming service — this whitepaper contains the key metrics) — Finally, this is an iterative process: you should repeat, take new steps, and make more optimizations based on what your data says, analyze, tweak, and repeat.
Why? Because the scenario might occur where we invest our resources (money) into an activity and we do not receive a significant direct ROI, meaning we didn’t attract the anticipated number of subscribers; still, from a global perspective, we may have had very good results from the marketing campaign because we increased engagement with existing subscribers.
That is why it is also so important to understand our audience to get the most out of our segmentation, focusing our efforts on the appropriate subscribers because in doing so we will ensure that our activities achieve what we intend. And, of course then, we will make our marketing budget profitable.